UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Transcription

1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 1 IN RE: WORLD WAR II ERA JAPANESE FORCED LABOR LITIGATION, This Document Relates To: Choe v Nippon Steel Corp, et al, ND Cal No -0 Kim v Ishikawajima Harima Heavy Industries Co, Ltd, et al, ND Cal No -0 Oh v Mitsui & Co, Ltd, et al, ND Cal No 00- Sin v Mitsui & Co, Ltd, et al, ND Cal No 00- Su v Mitsubishi Corp, et al, ND Cal No 00- Sung, et al v Mitsubishi Corp, et al, ND Cal No 00- Ma v Kajima Corp, et al, ND Cal No 01- / Master File No MDL- ORDER NO The seven above-captioned cases are the only class actions remaining before the court in a set of consolidated cases in which World War II veterans forced to labor without compensation during World War II seek damages and other remedies from Japanese

2 1 corporations or their successors in interest. These cases are brought by plaintiffs of Korean and Chinese descent. The other matters, which involved United States and Allied veterans, were previously dismissed because the 1 Treaty of Peace with Japan waived all such claims. In re World War II Era Japanese Forced Labor Litigation, 1 F Supp d, (ND Cal 00) (Order No ); see also Order No. Defendants seek dismissal of the present cases as well. The Korean and Chinese plaintiffs assert essentially the same claims as the United States and Allied veterans. Their primary cause of action arises under a statute enacted by the California legislature in, California Code of Civil Procedure.. The statute attempts to provide a cause of action for all individuals forced to labor without compensation by the Nazi regime, its allies and sympathizers, or enterprises transacting business in any of the areas occupied by or under control of the [same regimes] by extending the applicable statute of limitations to December 1,. Cal CCP.(a), (c). The crux of section. states: Any Second World War slave labor victim, or heir of a Second World War slave labor victim, Second World War forced labor victim, or heir of a Second World War forced labor victim, may bring an action to recover compensation for labor performed as a Second World War slave labor victim or Second World War forced labor victim from any entity or successor in interest thereof, for whom that labor was performed, either directly or through a subsidiary or affiliate. Id, subsection (b). The statute does not limit the cause of action to California residents. See id, subsection (a).

3 1 The Korean and Chinese plaintiffs also seek compensation and restitution under various other state laws, and two of the seven complaints assert violations of international law. Defendants argue that these cases must be dismissed for several reasons. Most significantly, defendants contend that section. is unconstitutional as applied against them. Notice of Claim of Unconstitutionality (Doc #); Def Br (Doc #0) at -; Def Supp Br (Doc #) at 1; see also United States Statement of Interest (SOI) (Doc #0) at 1-. Defendants argue that application of the statute is unconstitutional because it infringes upon the federal government s exclusive power over foreign affairs and violates the Due Process clause of the Constitution. Defendants also seek dismissal based on the following arguments: (1) the claims of these plaintiffs are barred by the applicable statute of limitations, () the 1 Treaty of Peace with Japan and subsequent treaties entered by Japan with Korea and China combine to bar the claims, () the claims raise nonjusticiable political questions, () consideration of the claims violates the principles of international comity, () evaluating the claims would contravene the act of state doctrine, () the doctrine of forum non conviens precludes this litigation in California and () the claims contravene the doctrine of foreign sovereign immunity. The court concludes that section. is unconstitutional as applied to defendants in the case at bar because it infringes on the federal government s exclusive power

4 over foreign affairs. To the extent the Korean and Chinese plaintiffs could assert claims under any other law, they are barred by the applicable statute of limitations and other principles of law. 1 I Defendants move to dismiss pursuant to both FRCP 1(b)() and 1(c). Defendants move under both provisions because, consistent with the defendants in the Allied matters, some of the defendants have filed answers in the present cases while others have not. As the court noted in Order No, the distinction between the two approaches is not important. The Ninth Circuit instructs that the standard for assessing a FRCP 1(c) motion is the same as the standard for a FRCP 1(b)() motion. See Enron Oil Trading & Transp Co v Walbrook Ins Co, Fd, (th Cir ) (citations omitted). On such motions, all material allegations in the complaint at issue must be taken as true and construed in the light most favorable to the plaintiff. Pillsbury, Madison & Sutro v Lerner, 1 Fd, (th Cir ). Dismissal is only appropriate when it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v Gibson, US 1, - (). These cases are subject to dismissal based on questions of law only. // // //

5 1 II As touched upon above, the present cases involve plaintiffs of Korean and Chinese descent. These cases require analysis separate from the cases dismissed earlier not because the Korean and Chinese plaintiffs assert claims that are distinct from the claims of the United States and Allied veterans, but because the cases are brought on behalf of nationals of countries that were not signatories to the 1 Treaty of Peace with Japan. The treaty was signed only by representatives of the United States and other Allied powers and Japan. See Treaty of Peace with Japan, [] UST, TIAS No 0 (1) (hereinafter, Treaty). Due to various historical and political circumstances during the time the treaty was negotiated and finalized, neither Korea nor China became a signatory to the treaty. See US Dept of State, Record of Proceedings at the Conference for the Conclusion and Signature of the Treaty of Peace with Japan - (1) (Exhibits in Support of Motion to Dismiss (Doc #), Exh B). As the chief negotiator for the United States, John Foster Dulles explained at the time that Korea was not a signatory because technically Korea was part of Japan until the war ended, and thus Korea was never at war with Japan. Id at. With respect to China, Dulles likewise explained that it could not be brought to the negotiating table because civil war within China and the attitudes of the Allied Governments * * * created a situation such that there [was] not general international agreement upon a single Chinese voice with both the right and the power to bind the Chinese nation to terms of peace. Id at.

6 1 Hence, although the treaty granted certain rights and benefits to Korea and China, the two countries simply were not signatories to the treaty. According to the plain text of the treaty, therefore, Korea and China do not qualify as Allied Powers subject to the waiver provision of Article (b). See Treaty at 0. As a result, unlike the claims of the United States and Allied plaintiffs, the Treaty of Peace with Japan cannot be interpreted to waive the claims of the Korean and Chinese plaintiffs. This circumstance creates a possible paradox that claims of non-americans arising from forced labor experiences during World War II might be litigated in a court of the United States while the identical claims of American and Allied veterans are barred by the treaty. That possibility lays bare the significant foreign policy questions implicated in these cases and compels the court to address the constitutionality of the statute upon which they are based. A Before reaching the constitutional issues presented by these cases, the court must address whether the claims of the Korean and Chinese plaintiffs made under section. are preempted by the Treaty of Peace with Japan. Although defendants simply suggest this in passing, see Def Br (Doc #0) at -, the United States asserts in its amicus curiae brief that the treaty preempts the claims of all non-allied plaintiffs, see United States SOI (Doc #0) at -1. The Korean and Chinese plaintiffs do not

7 1 directly address this argument. Nevertheless, the Supreme Court instructs that federal courts faced with both statutory questions and constitutional questions should decide the former first in an attempt to avoid unnecessary constitutional inquiries. See Department of Commerce v United States House of Representatives, US, - () (citations omitted); see also Liberty Warehouse Co v Grannis, US 0 () (applying doctrine to a challenge to a state statute); Mass State Grange v Benton, US () (same). As a preliminary matter, the court emphasizes that this inquiry is limited to whether the treaty preempts the claims of non-allied plaintiffs only. To be sure, section. purports to provide a cause of action for other individuals as well. Indeed, section. appears to have been motivated mostly by a desire to give California, as opposed to foreign, residents and citizens * * * a reasonable opportunity to claim their entitlement to compensation for forced or slave labor performed prior to and during the Second World War. Cal CCP., note 1(c). But the only cases remaining before the court were brought by nationals of non-signatory nations. Accordingly, the question is not whether the treaty preempts section. generally, but whether the treaty preempts California s effort to supply a cause of action for non- Allied plaintiffs such as those of Korean and Chinese descent. This order addresses that issue only. Under Article VI of the Constitution, the laws of the United States are the supreme Law of the Land; * * * any Thing in the Constitution or Laws of any State to the Contrary

8 1 notwithstanding. US Const art VI, cl. A treaty made by the President with the required approval of two-thirds of the Senate is part of the supreme law of the land, and thus, similar to federal statutes, valid treaties override any conflicting state law. Missouri v Holland, US, (); see also Ware v Hylton, US ( Dall) (). A treaty prevails whether it is ratified before or after the enactment of the conflicting state law. Laurence H Tribe, American Constitutional Law - at (d ed 00) (hereinafter, Tribe) (citing Nielsen v Johnson, US ()). Although the Supreme Court has written extensively about when congressional acts have preemptive effect, see, e g, Crosby v National Foreign Trade Council, 0 US (00); United States v Locke, US (00), it has provided little guidance on the preemptive effect of treaties. For acts of Congress, the Court provides that such legislation preempts state law when (1) Congress expressly provided for preemption, () Congress intended to occupy the field, or () the state law conflicts with the congressional statute at issue. Crosby, 0 US at ; see also English v General Elec Co, US, n (0) (recognizing that these categories are not rigidly distinct ). The Court has not established a similar detailed framework for courts to utilize when analyzing preemption by treaties. See, e g, United States v Belmont, 01 US, 1 () (noting, without any analysis, that treaties trump conflicting state laws). The Court has stated, however, that this preemption framework should not be applied mechanically when construing whether a treaty or international

9 1 agreement preempts a state law because the nation-state, not subdivisions within one nation, is the focus of the [treaty] and the perspective of our treaty partners. See El Al Israel Airlines, Ltd v Tsui Yuan Tseng, US, (). In order to determine whether a treaty trumps state law, therefore, the court should assess the language of the treaty and give the specific words of the treaty a meaning consistent with the shared expectations of the contracting parties. Id at (quoting Air France v Saks, 0 US, ()). The court must be governed by the text--solemnly adopted by the governments of many separate nations--whatever conclusions might be drawn from the intricate drafting history that [exists]. Chan v Korean Air Lines, Ltd, 0 US 1, (). With these principles in mind, the court looks first to Article (b) for an expression of the treaty s intent. As previously noted, this provision bars the claims of signatory nations and their nationals arising out of Japan s actions in the Second World War. See In re World War II, 1 F Supp d at -. To be sure, the signatory nations desired complete termination of all claims against Japan, but Article (b) has no effect on the claims of nationals from non-signatory nations. Hence, although from a perspective of 01 it may seem anomalous for the United States to negotiate a treaty that bars the claims of its own nationals without a provision that forecloses resort to a judicial forum in the United States by nationals of non-signatory nations, Article (b) contains no express limitation against claims of nonsignatory nationals. Little should be read into this omission,

10 1 which most likely can be explained by the inconceivability a half century ago of such claims by non-signatory nationals being pursued in United States courts. Other relevant provisions of the treaty suggest that the treaty does not address claims of non-signatory nationals. Specifically, article (a), which addressed Japan s post-war relationship with Korea, provides: The disposition of property of Japan and of its nationals * * * and their claims, including debts, against [Korea], and the disposition in Japan of property of [Korean] authorities and residents, and of claims, including debts, of [Korean] authorities and residents against Japan and its nationals, shall be the subject of special arrangements between Japan and such authorities. Treaty at. Similarly, with respect to China, article provides: Japan will be prepared to conclude with any State * * * which is not a signatory of the present Treaty, a bilateral Treaty of Peace on the same or substantially the same terms as are provided for in the present Treaty * * *. Id at 0. These provisions suggest that the treaty contemplates resolution of war claims with Korea and China through agreements separate and distinct from the Treaty of Peace with Japan and separate agreements necessarily create the possibility that the terms for resolving those claims may differ from the terms of the treaty entered into by the Allied nations. The fact that the signatory nations encouraged such agreements does not show an intent to occupy the field of non-signatory nations claims through the treaty. See, e g, Trojan Technologies, Inc v Com of PA, Fd 0, 0-0 (d Cir 0) (refusing to find that an international free trade agreement preempted a state buy-american

11 1 statute, in part, because the language in the agreement was hortatory rather than mandatory ). Whether the agreements subsequently entered by Japan with Korea and China eliminated the claims of these non-signatory nations does not bear on whether the Treaty of Peace with Japan preempts claims of Chinese and Korean nationals. The court reads the language of articles (a) and to suggest only that the signatory nations, including the federal government of the United States, did not intend the Treaty of Peace with Japan to control claims of individuals from non-signatory nations. To the extent section. provides a cause of action to such individuals, therefore, it does not conflict with the expressed intent of the treaty. Accordingly, the treaty itself does not trump the California law in this respect. B Simply because the claims of the Korean and Chinese plaintiffs derived from section. are not preempted by the Treaty of Peace with Japan does not mean that they can go forward, however. Providing a cause of action for these individuals triggers significant constitutional questions. Section. is unconstitutional because it infringes on the exclusive foreign affairs power of the United States. Relative to many of the federal government s powers, the contours of the foreign affairs power has been infrequently analyzed and even less frequently clarified. Nevertheless, the national government s exclusive authority to regulate the foreign

12 1 affairs of the United States has long been recognized as a constitutional principle of broad scope. See United States v Pink, US, () ( Power over external affairs is not shared by the States; it is vested in the national government exclusively. ); Hines v Davidowitz, 1 US, (1); Belmont, 01 US at 1; United States v Curtiss-Wright Export Corp, US 0, (). It follows that all state action, whether or not consistent with current foreign policy, that distorts the allocation of responsibility to the national government for the conduct of American diplomacy is void as an unconstitutional infringement on an exclusively federal sphere of responsibility. Tribe, - at. This principle, which prohibits state action that unduly interferes with the federal government s authority over foreign affairs derives from both the text and structure of the Constitution. The Constitution allocates power for external affairs to the legislative and executive branches of the national government and simultaneously prohibits the states from engaging in activities that might interfere with the national government s exercise of these powers. To be sure, there is no clause in the Constitution that explicitly grants a foreign affairs power to the federal government. See L Henkin, Foreign Affairs and the United States Constitution - (d ed ) (hereinafter, Henkin). But a number of provisions, when read together, strongly imply that such authority was intended. See Harold G Maier, Preemption of State Law: A Recommended Analysis, Am J Int l L, () (hereinafter, Maier) ( [N]either the Articles of 1

13 1 Confederation nor the Constitution provided for a general foreign affairs power. Nonetheless, there was never any real question that the United States would act as a single nation in the world community. ). Specifically, the Constitution provides that Congress possesses the authority [t]o lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States, US Const art I,, cl 1, [t]o regulate Commerce with foreign Nations, id, cl, and [t]o define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations, id, cl. In addition, while Congress is granted the power [t]o declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water, id, cl, the President is designated the Commander in Chief of the Army and Navy of the United States, id, art II,, cl 1. The President also is given the authority to make Treaties and appoint Ambassadors with the Advice and Consent of the Senate, id, cl, and to receive Ambassadors and other public Ministers, id,. With respect to the states, the Constitution directs that [n]o State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal or, without the consent of Congress, lay any Imposts or Duties on Imports or Exports or enter into any Agreement or Compact * * * with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay. Id, 1, cl.

14 1 These and other constitutional provisions evidence an intent on the part of the framers to grant paramount authority for foreign affairs to the political branches of the federal government, thereby necessitating the exclusion of intrusive efforts on the part of the states in foreign relations. The Federalist Papers bolster this interpretation. See Hines, 1 US at n ( The importance of national power in all matters relating to foreign affairs and the inherent danger of state action in this field are clearly developed in [the] Federalist papers * * *. ). For example, James Madison wrote: This class of powers forms an obvious and essential branch of the federal administration. If we are to be one nation in any respect, it clearly ought to be in respect to other nations. The Federalist No, at (C Rossiter ed 1). Similarly, Alexander Hamilton argued, albeit with respect to the related but explicit foreign commerce power of the national government, that [t]he interfering and unneighborly regulations of some States, contrary to the true spirit of the Union, have, in different instances, given just cause of umbrage and complaint to others, and it is to be feared that examples of this nature, if not restrained by a national control, would be multiplied and extended till they became not less serious sources of animosity and discord than injurious impediments to the intercourse between the different parts of the Confederacy. The Federalist No, at - (C Rossiter ed 1). And as noted in Hines, Thomas Jefferson, who was not generally favorable to broad federal powers, expressed a similar view in : My own general idea was, that the States should severally preserve their sovereignty in whatever concerns themselves alone, and that whatever may concern another State, or any foreign nation, should

15 1 be made a part of the federal sovereignty. Hines, 1 US at n (quoting Memoir, Correspondence and Miscellanies from the Papers of Thomas Jefferson (), vol, p 0, letter to Mr Wythe). The Supreme Court has long acknowledged the federal government s broad authority over foreign affairs. In, for example, Justice Sutherland noted that complete power over international affairs is in the national government and is not and cannot be subject to any curtailment or interference on the part of the several states. Belmont, 01 US at 1. Similarly, Justice Black observed a few years later that [o]ur system of government is such that the interest of the cities, counties and states, no less than the interest of the people of the whole nation, imperatively requires that federal power in the field affecting foreign relations be left entirely free from local interference. Hines, 1 US at. To be certain, the holdings of these and other decisions from the same time period were predominantly based on the supremacy of federal law; the Court determined that the state legislation at issue in these cases was preempted by existing federal law or international agreements. But the early observations contained in these cases regarding the national government s broad authority over foreign affairs are instructive because they describe the principles upon which the Supreme Court later relied in Zschernig v Miller, US (), to announce the foreign affairs doctrine that governs the case at bar. In Zschernig, the Supreme Court observed that the Constitution entrusts the field of foreign affairs * * * to the

16 1 President and the Congress. Id at (citing Hines, 1 US at ). The Court concluded that, as a result, the Constitution itself excludes state intrusion on the federal government s authority over foreign affairs even when the federal branches have not acted. Id at, 1; see also Henkin at. Pointing to the broad principle articulated in Hines, the Court stated that even in the absence of a treaty [or other federal law], a State s policy may disturb foreign relations. * * * If there are to be such restraints, they must be provided by the Federal Government. Zschernig, US at 1. In short, the Court concluded that state statutes must give way if they impair the effective exercise of the Nation s foreign policy. Id at 0. Zschernig involved an Oregon probate statute that conditioned the inheritance rights of an alien not residing in the United States on his ability to prove that American heirs would have a reciprocal right to inherit estates in the foreign country and that he would receive payments from the Oregon estate without confiscation, in whole or in part, by the governments of such foreign countries. Id at 0. The Supreme Court noted that it had earlier refused to invalidate a similar statute enacted by California on its face because that statute would have only some incidental or indirect effect in foreign countries. Id at - (quoting Clark v Allen, 1 US 0, ()). In Zschernig, however, the Court assessed the manner of [the Oregon statute s] application and observed that the law had compelled state courts to launch[] inquiries into the type of governments that obtain in particular foreign nations. Id at. The Court

17 1 noted, for example, that the statute triggered assessments of the actual administration of foreign law and the credibility of foreign diplomatic statements. Id at. In short, the statute seem[ed] to make unavoidable judicial criticism of nations established on a more authoritarian basis than our own. Id at 0. Looking at these effects of the Oregon statute, the Court concluded that it was unconstitutional because it affect[ed] international relations in a persistent and subtle way, had a great potential for disruption or embarrassment and triggered more than some incidental or indirect effect in foreign countries. Id at -, 0. Zschernig thus stands for the proposition that states may legislate with respect to traditional state concerns, such as inheritance and property rights, even if the legislation has international implications, but such conduct is unconstitutional when it has more than an incidental or indirect effect in foreign countries. Id at 0. As the First Circuit recently stated, under Zschernig there is a threshold level of involvement in and impact on foreign affairs which the states may not exceed. National Foreign Trade Council v Natsios, 1 Fd, - (1st Cir ), aff d on other grounds sub nom, Crosby v National Foreign Trade Council, 0 US (00). Or, as the Third Circuit has summarized the doctrine, if a state law were to involve[] the state in the actual conduct of foreign affairs[, the statute] is unconstitutional. Trojan, Fd at (citing Pink, US ).

18 1 This doctrine makes sense because the nation as a whole is affected when state-driven foreign policy has an impact on other countries. See Lori A Martin, The Legality of Nuclear Free Zones, U Chi L Rev, (). Indeed, for that very reason states have inadequate incentive to consider the effects of their actions on foreign relations. See id. Zschernig thus enables the courts to ensure that the states have not overstepped the line at the risk of endangering the nation as a whole. Before evaluating section. in this regard, the court rejects the Korean and Chinese plaintiffs suggestion that Zschernig is no longer valid. To be sure, some commentators have suggested that the reach of the Court s holding in Zschernig should be limited. See, e g, Henkin at n**; Curtis A Bradley & Jack L Goldsmith, Customary International Law: A Critique of the Modern Position, 0 Harv L Rev, (); Jack L Goldsmith, Federal Courts, Foreign Affairs, and Federalism, Va L Rev, - 0 (); Peter J Spiro, The States and Immigration in an Era of Demi-Sovereignties, Va J Int l L 1, 1- (); but see Tribe - at -; Maier at -. But Zschernig has not been overruled, and thus the constitutional principles it enunciates remain the law. See Natsios, 1 Fd at ( [T]here is simply no indication, in * * * any * * * post-zschernig case, that Zschernig is not good law and is not binding on us. ). California and all states enacting legislation touching upon foreign affairs are thus bound by the doctrines of Zschernig until the Supreme Court instructs otherwise. As the Ninth Circuit has noted on numerous occasions, speculation about the continuing vitality of Supreme

19 1 Court precedent does not permit us to ignore [such] controlling * * * authority. United States v Pacheco-Zepeda, Fd, (th Cir 01) (citing Agostini v Felton, US, () (directing that lower courts should leave to the Supreme Court the prerogative of overruling its own decisions ) (citation omitted)); see also Montana Chamber of Commerce v Argenbright, Fd, (th Cir 00) (citing Agostini and noting same); Duffield v Robertson Stephens & Co, Fd 1, 1 (th Cir ) (same). Indeed, on two recent occasions the Ninth Circuit has recognized the continuing vitality of Zschernig. See Gerling Global Reinsurance Corp of America v Low, 0 Fd, 1- (th Cir 01); Int l Assoc of Indep Tanker Owners v Locke, Fd, (th Cir ), rev d on other grounds sub nom United States v Locke, US (00). In Tanker Owners, the Ninth Circuit rejected an argument that oil regulations promulgated by the state of Washington were unconstitutional under Zschernig because the litigant failed to demonstrate that, even if those regulations [had] some extraterritorial impact, that impact [was] more than incidental or indirect. Tanker Owners, Fd (quoting Zschernig, US at ). The decision affirms, therefore, that when a litigant makes a showing that the statute at issue triggers more than some incidental or indirect effect in foreign countries, the statute is unconstitutional as an intrusion on the federal government s foreign affairs power. See id (quoting Zschernig, US at ). Similarly, in Gerling, although the Ninth Circuit declined to apply Zschernig to California s Holocaust Victim

20 1 Insurance Relief Act of (HVIRA), Cal Ins Code 00-0, see Gerling, 0 Fd at, the court did not suggest that Zschernig is no longer valid. Rather, the court concluded that the HVIRA did not trigger the concerns implicated by the statutes in Zschernig and cases applying its doctrine. See id. The court stated that it hesitate[d] to apply Zschernig to a facial challenge to state statutes involving foreign affairs (a) but that mainly involve[d] foreign commerce and (b) that [were] not directed at a particular country. Id. The court also suggested that it was hesitant to apply Zschernig because there is no evidence that HVIRA would implicate the diplomatic concerns mentioned in Zschernig. Id. By implication, therefore, the Ninth Circuit would apply Zschernig to state statutes that do not regulate commerce, are directed at a particular country or implicate the diplomatic concerns present in Zschernig. In addition, other courts have applied the principles of Zschernig to strike down state or local laws. See, e g, Natsios, 1 Fd, -1 (finding that the Massachusetts Burma Law, which restricted the ability of Massachusetts and its agencies from purchasing goods or services from companies that did business with Burma (Myanmar), was unconstitutional, in part, as a threat to [the] federal foreign affairs power ); Tayyari v New Mexico State University, F Supp, - (D NM 0) (striking down a university s policy designed to rid the campus of Iranian students because it conflicted with a federal regulation and frustrate[d] the exercise of the federal government s authority to conduct the foreign relations of the United States ); Springfield

21 1 Rare Coin Galleries v Johnson, 0 NE d 00, 0-0 (Ill ) (invalidating an Illinois statute that excluded South Africa from a tax exemption as more than an incidental intrusion on the federal government s foreign affairs power); New York Times Co v City of New York Commission on Human Rights, 1 NEd, (NY ) (striking down a New York City antidiscrimination statute because it interfere[d] with the foreign policy authority of the Federal Government ); Bethlehem Steel Corp v Board of Commissioners, Cal App d, -, 0 Cal Rptr 00 () (invalidating a California Buy American statute because it had more than some incidental effect in foreign countries and * * * great potential for disruption * * *. ). The infrequency with which Zschernig has been applied over the years does not suggest a weakening in the doctrine. To the contrary, it shows that the federal government has affirmatively enacted legislation or international agreements in most areas of foreign relations that expressly preempt conflicting state and local legislation under the Constitution s Supremacy clause, thereby obviating the need for analysis under Zschernig. See, e g, Crosby, 0 US (affirming invalidity of the Massachusetts Burma law on preemption grounds). It also suggests that, despite several high profile examples of international involvement, state and local authorities tend to focus on state and local issues. See Howard N Fenton III, The Fallacy of Federalism in Foreign Affairs: State and Local Foreign Policy Trade Restrictions, Nw J Int l L & Bus, (). Indeed, most actions by states and municipalities that directly address foreign

22 1 policy issues do not raise the type of diplomatic concerns expressed by the Court in Zschernig. For example, local authorities seeking to make international statements often enact non-binding resolutions or form sister-city relationships with foreign communities. See id. Section. represents a much greater foray into the field of foreign affairs. Turning to an analysis of section., the court reiterates that under Zschernig, California may legislate with respect to local concerns that touch upon foreign affairs, but only if its actions have just some incidental or indirect effect in foreign countries. Zschernig, US at (quoting Clark, 1 US at ). The court concludes that section., as applied to defendants here, clearly crosses this forbidden line. See Clark, 1 US at. The court s conclusion is mandated by the following observations: (1) the terms of section. and its legislative history demonstrate a purpose to influence foreign affairs directly, () the statute targets particular countries, () the statute does not regulate an area that Congress has expressly delegated to states to regulate, () the statute establishes a judicial forum for negative commentary about the Japanese government and Japanese companies, () the Japanese government asserts that litigation of these claims could complicate and impede diplomatic relationships of the countries involved, and () the United States, through the State Department, contends that section. impermissibly intrudes upon the foreign affairs power of the federal government.

23 1 First, the language of section. and the contemporaneous comments of its creators demonstrate that the statute embraces a foreign policy purpose, namely, to provide a mechanism for individuals to obtain war-related reparations. By its terms, the statute purports to enable individuals from any country forced to labor during World War II by the Japanese government or Japanese companies to recover compensation for such labor. See Cal CCP.(b). Moreover, as the notes to the statute indicate, the legislature determined that the victims of Nazi [and Japanese] persecution have been deprived of their entitlement to compensation [earned] during the Second World War. Id, note 1(b). Indeed, Governor Gray Davis stated shortly after signing the bill that the law would help right a historic wrong which occurred over 0 years ago during World War II when men, women and children were forced into slave labor. See Henry Weinstein, Bill Signed Bolstering Holocaust-Era Claims, LA Times, July,, at A. The author of the measure, Senator Tom Hayden, similarly asserted at the time: [Section.] sends a very powerful message from California to the U.S. government and the German government, who are in the midst of rather closed negotiations about a settlement. * * * If the international negotiators want to avoid very expensive litigation by survivors as well as very bad public relations for companies like Volkswagen and Ford, they ought to settle. * * * Otherwise, this law allows us to go ahead and take them to court. Id. Since the statute purports to create a cause of action for compensation from companies related to the Nazi regime, its allies or sympathizers, it cannot be doubted that the same message is intended for the Japanese government and Japanese corporations.

24 1 These issues and determinations which underlie section. are thus identical to the uniquely federal reparations concerns that were addressed by the United States while negotiating the Treaty of Peace with Japan. See In re World War II, 1 F Supp d at ; see also Ware, US ( Dall) at 0 (establishing that the war-related claims of individual citizens can only be brought by their government); Burger-Fischer v Degussa AG, F Supp d, - (D NJ ) (noting same). By establishing California courts as an avenue for reparations, therefore, section. engages California in the uniquely federal foreign policy function of addressing claims for reparations that arise in the aftermath of a war. Second, section. targets particular countries by allowing a cause of action against companies that transacted business in any of the areas occupied by the Nazi regime, its allies or sympathizers. See Cal CCP.. Because the statute singles out such a narrow set of countries--most notably, Germany and Japan--it suggests that California intended the statute to send an explicit foreign relations message, rather than simply to address some local concern. As a contrast, in Trojan the Third Circuit upheld a Pennsylvania Buy American law, in part, because the statute applie[d] to steel from any foreign source, without respect to whether the country might be considered friend or foe. Trojan, Fd at (emphasis added). By not singling out a particular country or set of countries, the Pennsylvania statute implicitly focused on a local concern (the local steel industry), as opposed

25 1 to engaging in international relations directly with a particular country or set of countries. The Korean and Chinese plaintiffs point out that the Ninth Circuit referred to this characteristic of the law in Trojan when assessing the applicability of Zschernig to the HVIRA, implying that this court should do the same with respect to section.. Gerling, 0 Fd at -. As discussed, the Gerling court was hesitant to apply Zschernig, in part, because the HVIRA was not directed at a particular country. Id at. But, in this regard, section. is significantly different from the HVIRA. While section. is aimed at a few specific countries, the HVIRA applied to insurers from any country. See Cal Ins Code 0(a) ( Any insurer * * * that sold * * * insurance policies * * * to persons in Europe, which were in effect between and [must file certain information with the insurance commissioner]. ) (emphasis added). Thus, the Gerling court s reliance on this observation in Trojan to minimize the foreign affairs effect of the HVIRA suggests the opposite conclusion for section.. With respect to this point, therefore, section. is closer to the statute struck down by the Supreme Court in Zschernig. The Oregon statute at issue was generally applied only against residents of a narrow set of countries (those established on a more authoritarian basis than our own ); section. similarly applies only against companies of a narrow set of countries. Indeed, section. targets an even smaller set of countries than the law at issue in Zschernig. The California law s

26 1 focus on a few particular countries, therefore, further evidences an intrusion by the state on the field of foreign affairs. Third, section. does not regulate an area that Congress has expressly delegated to the states. In fact, by establishing a mechanism for forced labor victims to obtain war reparations, the statute relates to a subject that has always been addressed at the federal level. To the contrary, the HVIRA regulates insurance companies, which, as the Gerling court noted, has been deemed by the Supreme Court to be a local matter. Gerling, 0 Fd at (citing FTC v Travelers Health Ass n, US, 0 (0)). At bottom, therefore, the HVIRA is a California insurance regulation of California insurance companies * * *. Id at. The Ninth Circuit s hesitancy to apply Zschernig to a constitutional challenge of the HVIRA because the law regulated an area of commerce for which Congress had expressly delegated the regulatory power to the states is thus irrelevant to the court s analysis here. Accordingly, section. cannot be validated as a regulation of a local concern in the same manner as the HVIRA. The Korean and Chinese plaintiffs do not contend otherwise. Fourth, because section. opens the door to lawsuits about the conduct of the Japanese government and Japanese companies during the Second World War, the primary dangers of the Oregon statute that concerned the Court in Zschernig are likewise triggered here. Specifically, such litigation cannot be carried to fruition without making unavoidable judicial criticism of the efforts of Japan and its war industry. See Zschernig, US at

27 1 0. To be sure, the commentary would by necessity focus on the past, but, particularly given the fact that it would emanate from the official forum of American courts, Japan s current regime could not avoid being negatively implicated by association. It seems beyond doubt, therefore, that the statute has the potential to have an impact on foreign relations between the United States and Japan in a persistent and subtle way. See id. Fifth, and related to the court s fourth observation, the Japanese government has made clear that it is concerned about the effects of section. on Japan s relationship with the United States. See Views of the Government of Japan, United States SOI (Doc #0), Exh 1. In a submission to this court by the Embassy of Japan, the Japanese government points out that the claims of the Korean and Chinese plaintiffs have already been settled or are in the process of being settled through diplomatic negotiations between Japan, China, and North and South Korea. See id at. California s efforts to provide an alternative forum for these claims interferes with Japan s diplomatic efforts and credibility in this regard. As Japan states: Permitting plaintiff s claims will put the courts in the United States in an unwarranted place to inevitably affect relations between the countries concerned, including the bilateral settlement reached after highly political and sensitive negotiations. Such involvement of the courts in the United States could complicate and impede relationships between Japan and those countries as well as the bilateral relationship between the United States and Japan. The Government of Japan is convinced that these issues should not be adjudicated in the courts in the United States. Id. To be sure, the court recognizes that Japan has a financial interest in repressing any demands for further compensation against

28 1 its nationals arising out of the war. But Japan s submission nevertheless serves as a reminder that the United States also has its own interest in maintaining normal diplomatic relations with Japan. The protests of the Japanese government thus demonstrate that section. has great potential for [causing] disruption or embarrassment here in the United States. See Zschernig, US at. Finally, the federal government, as represented by the State Department, agrees with defendants that section. impermissibly intrudes on the foreign affairs power of the federal government. See United States SOI (Doc #0) at 1-. The State Department represents one of the two political branches with the exclusive authority to handle the country s foreign affairs, and thus it is in a good position (and certainly better position than this court) to determine if that power has been intruded upon. In this regard, the government asserts: By enacting the statute, California has created its own policy in a particular area of foreign relations--one which judges the activities of foreign governments and corporations during * * * World War II, and the treaties and agreements Japan and other nationals made in the wake of the war. If each state were free to impose burdens that diverge from the foreign policy interests of the nation as a whole as expressed by the President and to have its own foreign policy, it would * * * significantly diminish the President s economic and diplomatic leverage and, hence, his authority to negotiate agreements with foreign governments. Id at (citation omitted). The court finds it notable that the Supreme Court concluded that application of the law at issue in Zschernig was unconstitutional even though the federal government had submitted an amicus curiae brief in which it stated that [t]he

29 1 government does not * * * contend that the application of the * * * statute in the circumstances of this case unduly interferes with the United States conduct of foreign relations. Zschernig, US at -. Section., to the contrary, has triggered the opposite reaction from the federal government. Accordingly, the concerns of the State Department further persuade the court to conclude that an application of section. to defendants here cannot pass constitutional muster. The few arguments of the Korean and Chinese plaintiffs in opposition to this conclusion are unpersuasive. First, the Korean and Chinese plaintiffs make much of the distinction between facial and as applied challenges to the constitutionality of a statute. Specifically, they argue that Zschernig, which the Court framed as an as-applied analysis, cannot govern the present inquiry because defendants have challenged the validity of section. on its face. See Pl Supp Br (Doc #) at -. But the Korean and Chinese plaintiffs are simply incorrect; defendants, in fact, challenge section. as it applies to them. See Def Supp Br (Doc #) at 1. As the Court established long ago, the proper method for adjudicating the constitutionality of a statute is for the affected parties to challenge the statute at issue as applied to them. See United States v Raines, US, - (0). In Raines, the Court made clear that [t]he very foundation of the power of the federal courts to declare Acts of Congress unconstitutional lies in the power and duty of those courts to decide cases and controversies properly before them. Id; see also United States v Kurt, Fd

30 1, (th Cir ) ( A defendant cannot claim a statute is unconstitutional in some of its reaches if the statute is constitutional as applied to him. ) (citing Raines, US at - ); Richard H Fallon, Jr, As-Applied and Facial Challenges and Third-Party Standing, 1 Harv L Rev, (00) (concluding that there is no single distinctive category of facial, as opposed to as-applied, litigation. Rather, all challenges to statutes arise when a particular litigant claims that a particular statute cannot be applied against her. ). To be sure, both the Supreme Court and the Ninth Circuit have cited this distinction as a factor influencing their analyses under the foreign affairs doctrine. See Zschernig, US at (distinguishing Clark, in which the Court had refused to strike down a similar California statute, as addressing a challenge to the statute on its face); Gerling, 0 Fd at (noting that the HVIRA was challenged on its face). But given the posture of the challenge to section. brought by defendants, the court is not persuaded by the efforts of the Korean and Chinese plaintiffs to cloud the analysis here. The Korean and Chinese plaintiffs also contend that because defendants are businesses, as opposed to foreign governments, section. does not implicate Zschernig s foreign affairs doctrine. See Pl Supp Br (Doc #) at. But such a contention does not square with their complaints, in which the Korean and Chinese plaintiffs emphasize that the conduct of the Japanese companies during the war was condoned and controlled by the Japanese government. See, e g, Sung Compl, ( The Japanese 0

31 1 government set up programs whereby Japanese companies (including defendants) could use civilian internees as slaves or forced laborers. ); Oh Compl,, ( In August, Japanese Army General Minami Jiro was appointed Governor-General of Korea. Under his control private Japanese companies, including the Defendants, expanded those industries in Korea critical to Japan s war-making ability. * * * Japan enacted laws applicable to Korea forcing Koreans to labor in certain industries. ). The Japanese government, as opposed to just these private defendants, is clearly implicated by the claims asserted under section. by the Korean and Chinese plaintiffs. Even if these cases could somehow be characterized as claims between private parties, Zschernig clearly instructs that an application of state legislation that has more than some incidental or indirect effect in foreign countries is invalid. See Zschernig, US at (emphasis added). Whether section. is applied to businesses or the Japanese government, the statute certainly has an effect in Japan. Finally, the Korean and Chinese plaintiffs also suggest that since Congress has not addressed the subject matter here-- forced labor compensation claims against Japanese companies--then there is no federal policy or legislation with which section. may conflict. See Pl Supp Br (Doc #) at. To be sure, this argument would be relevant if the court were analyzing whether section. violated the federal government s foreign commerce authority. See Gerling, 0 Fd at -1. As already discussed, however, the foreign affairs doctrine prohibits state and local 1

32 1 intrusion into the field of foreign relations regardless whether a conflicting federal law or policy exists. See Tribe, - at ( [A]ll state action, whether or not consistent with current federal foreign policy, that distorts the allocation of responsibility to the national government for the conduct of American diplomacy is void * * *. ). It is the intrusion itself, which could inhibit the federal government s ability to deal with those problems, that makes the application of such legislation unconstitutional. See Zschernig, US at 1. The federal government s actual policy, therefore, is irrelevant to the court s analysis. Based on the foregoing observations, the court concludes that applying section. to defendants will affect[] international relations in a persistent and subtle way, have a great potential for disruption or embarrassment in the United States and trigger more than some incidental or indirect effect in Japan. See Zschernig at -, 0. As a result, California s attempt to provide a cause of action to the Korean and Chinese plaintiffs against defendants is an unconstitutional intrusion on the exclusive foreign affairs power of the federal government. III In light of the court s conclusion that the application of section. to defendants is unconstitutional, the Korean and Chinese plaintiffs may not rely on the California statute to pursue their claims against defendants. The Korean and Chinese plaintiffs contend, however, that they allege claims that arise under other